The Beige Book: March 2007

The Federal Reserve Bank gathers anecdotal information on current economic conditions through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information.

The Federal Reserve has issued its Beige Book report for March. The Fed commented on the national real estate and construction market as follows:

Almost all Districts reported that housing markets remained weak, but signs of stabilization in the sector were noted in several Districts. Chicago, Minneapolis, Dallas, and San Francisco reported that new residential construction continued to fall, and New York and Philadelphia noted that homebuilders had scaled back their plans. But Cleveland and Atlanta noted that construction had flattened out. Housing contacts in the Atlanta District reported that declines in sales were moderating, except in Florida. San Francisco also noted a slowdown in the deterioration of conditions in California, though activity in hard-hit areas such as Arizona continued to contract. In the New York District, builders in New Jersey reported some stabilization in the market for new homes, and demand for multi-family units in New York City remained strong. Richmond said housing markets in general showed additional signs of firming, while contacts in the Kansas City and Cleveland Districts, where activity was still at low levels, were encouraged by recent increases in buyer inquiries.

Still, further contraction in housing markets was noted in several Districts, and home prices were generally flat or declining. According to the Dallas District, inventories of unsold homes in the Dallas-Fort Worth area rose to new highs due to slowing sales and rising cancellations. Contacts in the Boston District saw no signs that the weakness in housing was nearing an end. Homebuilders in the Philadelphia District were making significant price reductions to move new homes, and real estate agents in that District reported that prices for existing homes had come to a standstill. San Francisco also reported noticeable recent price declines in some areas, while Chicago reported that more than three-fourths of builders in the Chicago area were adding non-price incentives to sell homes.

Commercial real estate markets continued to firm in many Districts and remained generally solid or strong elsewhere. New York did report a slight overall easing in the New York City office market, as vacancy rates edged higher in midtown Manhattan. However, asking rents throughout the city were up 25 percent from a year ago. Chicago also reported slightly slower expansion of nonresidential construction in the District as a whole but said office construction in downtown Chicago was quite strong and that office rents were increasing in the city. Boston reported considerable increases in commercial investment throughout New England over the past year; Atlanta also said demand for commercial development remained strong. According to the Richmond District, one area experiencing some difficulties in its office market was greater Washington, D.C., including northern Virginia, where high rents and lower optimism had reduced leasing activity.

Click here to read the entire report.

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